Rollins, Inc.

• Valuation3 / 10
• Management8.5 / 10
• Balance Sheet4 / 10
• Profitability7.5 / 10
• Revenue Growth6 / 10
• Risk Assessment6 / 10
• Competitive Moat9 / 10
• Earnings Quality7.5 / 10
• Capital Efficiency7.5 / 10

Despite these structural strengths, recent operating performance reveals emergent vulnerabilities. In Q2 2026, residential volume growth at Orkin dragged aggregate residential growth down to 3.6% as inbound digital search leads softened progressively. Simultaneously, gross margins fell 100 basis points to 52.8% due to rising self-insured technician healthcare claims and vehicle fuel costs,, pulling quarterly incremental margins down to 6.5%. These headwinds demonstrate that Rollins is not immune to labor cost inflation or consumer digital acquisition volatility.⁵

Valuation synthesis indicates an asymmetric downside profile. At $32.26 per share as of 2026-10-12, Rollins trades at 25.91x forward earnings, representing an 11.72% premium to our composite Fair value of $28.87 (implied return of -10.49%). Across our multi-model valuation framework, which balances multi-stage moat fade ($32.27), forward earnings ($26.52), owner earnings ($31.30), and discounted cash flow ($23.99), the share price as of 2026-10-12 provides no margin of safety against further lead volume deceleration. We therefore issue a Reduce rating.⁴

Gross margins fell 100 bps to 52.8% in Q2 2026 driven by softer volume, technician healthcare claims inflation, and vehicle fuel headwinds,, pulling incremental margins down to 6.5%. Operating margin falling below 16.5% over 18 months implies an estimated -22.4% fair value impact.⁵

Signals severe operating deleverage where technician healthcare costs and fuel expenses outpace revenue gains, falsifying margin expansion toward 20%.

現在:6.5% in Q2 2026

The bull scenario envisions an accelerated rebound in Orkin residential inbound digital search, robust commercial contract expansion, and rapid operational integration of tuck-in acquisitions like Romex. Fleet management savings under Wheels and centralized procurement exceed expectations, driving accelerated operating margin expansion and double-digit diluted earnings compounding. This optimistic path yields a target of $33.97, carrying an estimated probability of 20.0% and an implied return of 5.3% relative to $32.26.

Rollins maintains a disciplined, shareholder-friendly capital allocation strategy focused on high-return reinvestment. The primary capital priority is programmatic tuck-in M&A, where management acquires local pest control operators (such as Romex) at accretive multiples to immediately enhance route density. The balance sheet remains highly conservative, with total debt of $1,115.30M against a market capitalization of $15,519.35M (debt weight 6.70%). Excess cash flow is returned to shareholders via consistent quarterly dividends ($0.73 per share base) and opportunistic repurchases to offset equity compensation dilution.

Forecast cash flows / share

$4.76

Terminal value / share

$20.03

Signed net debt / current share

$0.80

Starting revenue

$37.6億

Projected revenue

$55.1億

Projection period

5 years

Terminal multiple

4.15×

Discount rate

8.07%

Net debt

$3.9億

Diluted shares

4.8億 shares